hedge forex positions with no loss

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Hello. Please excuse me for my newbie question. I want to hedge my forex positions (i.e buy or sell ) with other financial instruments with no loss to my capital. Is it possible anyway ? How i can do this if this possible ? Thanks.
 
Hi ilqar200,
Hope you are doing well.
It is better to check with your Broker the requirements for hedged positions, because different brokers are having different politic about that.
In my situation when I hedge positions on FX the margin requirements are reduced to 0.
When holding equal trades, long and short, which neutralizes any margin movement no matter where the price goes, simply because if you are down on one, you are up the same amount on the other, therefore margin remains the same until you close one of those positions!
The zero hedged margin is saving additional funds that would not be available otherwise. However, you have to be rally careful when closing one of the hedged positions, because that may lead to a Stop out.
 
As LazzarR recommended first it would be better to check if your Broker allows hedging, as many of them do not allow placing trades which are directly hedged.
There are different types of hedging  and you could hedge against a particular currency by using two different ccy pairs. A good choice for hedging Forex positions are also the options. If you time the market just right it would be possible to make more money and minimize additional risk But without an experience this would not be a very profitable strategy.
 

No system with no loss exists. Hedging systems neither.

Just one short description (of the downside) :

Every hedge has a cost, so before you decide to use hedging, you must ask yourself if the benefits received from it justify the expense. Remember, the goal of hedging isn't to make money but to protect from losses. The cost of the hedge - whether it is the cost of an option or lost profits from being on the wrong side of a futures contract - cannot be avoided. This is the price you have to pay to avoid uncertainty.

We've been comparing hedging versus insurance, but we should emphasize that insurance is far more precise than hedging. With insurance, you are completely compensated for your loss (usually minus a deductible). Hedging a portfolio isn't a perfect science and things can go wrong. Although risk managers are always aiming for the perfect hedge, it is difficult to achieve in practice.

 
Greetings,
The hedging will not help you to protect your funds from loss, because always when you enter in hedge means that you have one position in market direction and another in opposite. In this case basically you have no risk and no position in fact.
If you want to find any correlation between different FX pairs - just have an idea that this will be temporary and the level of correlation will not last for really long time, because the market is changing.
 
FrancoisT:
Greetings,
The hedging will not help you to protect your funds from loss, because always when you enter in hedge means that you have one position in market direction and another in opposite. In this case basically you have no risk and no position in fact.
If you want to find any correlation between different FX pairs - just have an idea that this will be temporary and the level of correlation will not last for really long time, because the market is changing.
And how do you determine the direction (and counter-direction)? That is not how hedging is done
 
FrancoisT:
Greetings,
...
If you want to find any correlation between different FX pairs - just have an idea that this will be temporary and the level of correlation will not last for really long time, because the market is changing.
Then you make something wrong. Many instruments (not only currency pairs) correlate to each other over years and decades. What you maybe mean is the currency strength.
 
That depends on what kind of position you are trying to hedge. If it is a spot Forex trade, you can manage it with an equal but opposite trade. For example, if you bought 1 lot of GBP/USD, you can hedge it with a sale of 1 lot of GBP/USD.
 
krelian99:
Then you make something wrong. Many instruments (not only currency pairs) correlate to each other over years and decades. What you maybe mean is the currency strength.
Greetings,
That is correct. I mean the currency strength and that the relevant in two currencies is not the same all the time and even if any at a time, it will not be constant :)
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